I am directed to
invite your attention to the changes made in Chapters 8, 9 and 9 A of the
revised Exim Policy 1997-2002 and Handbook of Procedures, Vol. I, which were
announced on 31.3.2001. These changes have necessitated amendments in
notifications governing duty free import/procurement of goods by EOU/EPZ/STP/EHTP/SEZ
units. The amendments have since been carried out vide notification Nos.
56/2001-Cus, and 29/2001-CE, both dated18.5.2001. A fresh notification [No.
28/2001-CE, dated 16.5.2001] has also been issued for allowing clearance of
goods manufactured by EOUs and units in EPZ/SEZ/EHTP against Advance Release
Orders issued against Advance Licence/Duty Free Replenishment Certificate.
Further, a Customs notification (No. 55/2001 – Cus, dated 16.5.2001) has been
issued to allow re-importation of cut & polished diamonds without payment of
duty after certification/grading by specified laboratories/agencies. This
facility is available to certain category of exporters. A copy each of the
notifications is enclosed for reference. The revision of Exim Policy and HOP has
also necessitated amendments in existing Circulars/instructions, and the same
has been made wherever necessary.
The salient
features of the changes are explained below:
A. Changes
Relating to Gem& Jewellery Sector:
(i) Export of
Cut & Polished Diamonds for Certification/Grading.
2. In the
revised EXIM Policy, in para 8.13(b) a new provision has been made to allow gem
& jewellery exporters with track records of at least three years and having
an annual average turnover of Rs.5 crore and above during the preceding three
licensing years to export cut & polished diamonds each weighing 0.50 of a
carat and above for the purpose of certification/grading by specified
laboratories/agencies as mentioned in the said para and for re-import thereof
without payment of duty. This grading/certification facility is expected to help
our exporters to get better value when these are finally exported for sale. The
diamonds exported for grading/certification, shall be re-imported within three
months of export. At the time of the export of the diamonds for
certification/grading purposes, all the essential particulars, which may be
considered necessary by Jewellery experts for establishing identity of the
diamonds at the time of re-import (such as height, circumference and weight of
each piece, estimated value, etc.), shall be furnished by the exporters and duly
checked by proper officer of Customs so that the same particulars can be
rechecked to establish linkage
& identity on re-importation.
3. To implement
the aforesaid provision of the EXIM Policy, a new notification (No. 55/2001-Cus,
dated 16.5.2001) has been issued providing for re-import of diamonds, after
certification/grading, without payment of duty.
(ii) Export
Against Supply by Foreign Buyer.
4.
Paragraph 8.19 of the Policy read with paras 8.43 to 8.53 of HOP provides that
when export orders are placed on the nominated agencies/status holders, the
foreign buyer may supply to the nominated
agencies/status
holders, in advance and free of charge gold/silver/platinum, alloys, findings
& mountings of gold/silver/platinum for manufacture and export. In the
revised Policy, this facility of direct export against supply by foreign buyer
has been extended to the exporters of three years standing having an annual
average turnover of Rs. 5 crores during the preceding three licensing years.
Such importer under para 8.19 of the Policy shall be required to furnish a bank
guarantee equivalent to one and a half times the customs duty leviable
on the imported goods to safeguard revenue interests. It may be noted
that the relevant paragraph of the Handbook also provides that in case of non-fulfilment
of export obligation/non-achievement of stipulated value addition, the Customs
shall recover the duty alongwith interest, which may include enforcement of bank
guarantee.
5. At present,
notification No. 56/2000-Cus, dated 5.5.2000 allows duty free import of
gold/silver platinum, alloys, findings & mountings of gold/silver/platinum
and plain semi-finished gold/silver/platinum jewellery to nominated
agencies/status holder exporters under the scheme “Export Against Supply by
Foreign Buyers”. To implement the above said change in the Policy provision,
notification No. 56/2000-Cus, dated 5.5.2000 has been suitably
amended vide notification No.56/2001-Cus, dated 18.5.2001 so as to
include exporters having an anual average turnover of Rs.5 crore and above
during the preceding three licensing years within its ambit subject to condition
mentioned about bond and bank guarantee etc., which already applies to status
holders.
(iii) Personal
Carriage of Jewellery/Precious, Semi-Precious Stonnes/Beads/Articles as samples
for Export Promotion Tours.
6. The
notifications governing duty free imports by gem & jewellery units in EOU/EPZ
& Jhandewalan Special Export Oriented Complex, allow personal carriage of
precious metal jewellery or precious or semi-precious stones or beads as samples
upto US $ 1,00,000 for export promotion tours on approval of Gem and Jewellery
Export Promotion Council. In the revised Handbook of Procedures, in Paragraph
9.41 (c), the condition of approval by Gem and Jewellery Export Promotion
Council has been substituted by approval of Development Commissioner. To align
the Customs notifications with revised provision of the HOP, suitable amendment
has been carried out in notification Nos. 3/88-Cus, dated 14.1.1988, 177/94-Cus,
dated 21.10.94 and 277/90-Cus, dated 12.12.90, vide notification No.
56/2001-Cus, dated 18.5.2001.
(iv) Sale of
Jewellery through Retail Outlet/Showroom in the Departure Lounge at
International Airports
7. Under the
present dispensation, the units in EPZ and Jhandewalan Jewellery Complex are
allowed to supply gem & jewellery manufactured by them to the retail outlets
or showrooms set up in the departure lounge at international airports in Delhi
and Mumbai for sale to the tourists leaving India. A request was received from
MMTC to notify Chennai, Thiruvananthapuram airports for sale of Jewellery from
duty free shops. Presently export of gem and jewellery in respect of EPZs is
allowed through specific airports as specified in Annexure – II to the
notification No. 177/94-Cus, dated 21.10.1994. These specified airports are
Sahar (now Chatrapati Shivaji International Airport), Thiruvananthapuram,
Calicut, Cochin, Delhi, Calcutta (Kolkata), Chennai, Visakhapatnam and Hyderabad.
In view of the fact that at all these international airports retail
outlets/showrooms are either in existence or are likely to be set up in future,
it has been decided to allow sale of jewellery through the retail
outlet/showroom in departure lounge at all these international airports. To
implement the decision, notification Nos. 177/94-Cus, dated 21.10.1994 and
3/88-Cus, dated 14.1.1988 have been suitably amended vide notification No.
56/2001-Cus, dated 18.5.2001.
(iv) Import of
Raw Material/Consumables/Gold & Export of Gold Jewellery
by Export Oriented Units through Bangalore Airport.
8. At present,
notification No. 277/90-Cus, dt. 12.12.90 allows import and export of specified
goods (other than capital goods) for manufacture of jewellery for export by
airfreight through the Customs airports at Bombay, Calcutta, Chennai,
Thiruvananthapuram and Delhi. It has been brought to our notice by trade as also
the Department of Commerce (DOC) that Bangalore has now become a major export
center for jewellery and therefore, the EOUs should be allowed to import raw
materials and export
finished
products through Bangalore Airport. The matter was considered and it has been
decided to allowthis facility. Notification No. 277/90-Cus, dt. 12.12.90
governing duty free import by gem & jewellery EOUs has been suitably amended
vide notification No. 56/2001-Cus, dated 18.5.2001 to allow import of gold and
export of gem & jewellery by air-freight through the Bangalore airport.
(v) Deletion of
Condition from Notification No.277/90-Cus, dt. 12.12.90, Governing Duty Free
Import by Gems & Jewellery Units in EOU.
9. Presently,
one of the conditions [Condition No.(ii)] of notification No.277/90-Cus, for
allowing duty free import of goods by Export Oriented units in gem and jewellery
sector is that “ the importer is covered, wherever required, by a general or
specific permit issued in this behalf
by the Reserve Bank of India “. It has been brought to our notice by the trade
as well as DOC that under the EOU scheme, no permission from RBI is required for
import of raw material and as such, imports should be allowed without insisting
on RBI permission.
10. As per the
paragraph 9.5 of the Handbook of Procedures (HOP), Vol. I, the letter of
Permission (LOP)/Letter of Intent (LOI) issued to EOU/EPZ/EHTP/STP units by the
concerned authority would be construed as a license for all purposes including
for procurement of raw materials and consumables either directly or through
designated canalizing agency. Thus, once LOP is issued to a unit, it serves the
purpose of license for import of raw material etc. In view of this, condition
No. (ii) of the notification No. 277/90-Cus, dated 12.12.1990 appears to the
redundant. The matter was considered and it has been decided to delete this
condition. [In this connection, amendment carried out vide notification No.
56/2001-Cus, dated 18.5.2001 refers.]
B. Changes
Relating to EOU/EPZ/STP/EHTP/SEZ Scheme.
(i) DTA Sale of
Finished Products Including Rejects by EOU/EPZ/STP/EHTP Units.
11. Para 9.9 (a) of the EXIM Policy (pre-revised) allowed EOU/EPZ units to sell rejects in DTA (Within overall limit of 50% of FOB value of exports) subject to achievement of NFEP prescribed in Appendix-I of the said Policy. The notification (No. 2/95-CE, dated 4.1.95) issued in this behalf provides that rejects within the overall limit of 50% of FOB value of exports may be sold in DTA on payment of excise duty equivalent to 50% of customs duty. This is subject to achievement of minimum NFEP.
12. The
revised provision of the Policy
provides that sale of rejects upto 5% of FOB value of exports shall not be
subject to achievement of NFEP . This change has been made on the ground that in
the new units, the initial production may not be upto export standards and in
such a situation, the units would not have any option but to clear the goods in
DTA as rejects. To implement the
change, an amendment has been carried out in notification No. 2/95-CE, dated
4.1.95, vide notification No. 29/2001-CE, dated 18.5.2001 providing inter alia,
for sale of rejects upto 5% of value of exports at a concessional rate of duty
without achievement of NFEP.
(iii) DTA Sale
of By-Products by EOUs/EPZ Units.
13. Before
revision of the Policy, by-products included in the LOP/LOI were allowed to be
sold in DTA on payment of applicable duty. The revised para 9.9.(h) of the
Policy provides that within the overall limit of 50% of FOB value of exports,
by-products can also be cleared for sale in DTA (subject to achievement of NFEP)
on payment of concessional duty i.e. 50% customs duty. Suitable
amendment in notification No.2/95-CE, dated 4.1.95 has been carried out for
implementation of this provision. Notification No. 29/2001-CE, dated 18.5.2001
may be seen for details.
(iv) Disposal of
Waste/Scrap/Remnants by EOU/EPZ/STP/EHTP Units in DTA.
14. Prior to
revision of the EXIM Policy, scrap/waste/remnants arising out of production
process or in connection therewith, within overall limit of 50% of FOB value of
exports were allowed to be sold in DTA on payment of concessional rate of duty
subject to achievement of minimum NFEP. In paragraph 9.20 of the revised Policy,
for DTA sale of scrap/waste/remnants within the overall limit of 50% of FOB
value of exports on payment of concessional rate of duty, linkage with
achievement of NFEP has been removed. Notification No.2/95-CE, dated 4.1.95, has
been suitably amended, vide notification No. 29/2001-CE, dated 18.5.2001, in
order to implement this change.
(v) Items
Permitted for Duty free Import by EOU/EPZ/STP/EHTP Units.
15. Para 9.8 of
the Handbook of Procedures provides the list of items which are permitted for
import by EOU/EPZ units. In the revised edition of HOP, two additional items
viz. (i) raw materials for making capital goods for use within the unit, and
(ii) any other item with the prior approval of Board of Approval,have been
incorporated. To give effect to this change, suitable amendments have been made
in the notifications governing duty free import/procurement from domestic market
by EOU/EPZ/EHTP/STP units. Notification Nos. 56/2001-Cus and 29/2001-CE, both
dated 18.5.2001 may be referred to for details.
(vi)
Sub-Contracting Abroad by EOU/EPZ/SEZ units.
16. Under
paragraphs 9.17 (a) & 9-A.12 (a) of the revised EXIM Policy, EOU/EPZ/EHTP/STP/SEZ
units have been permitted to sub-contract part of their production process
abroad with the approval of Board of Approval. In order to implement this
provision suitable amendments have been made in the notifications governing
duty free import by EOU/EPZ/ETHP/STP/SEZ units. Notification No.
56/2001-Cus, dated 18.5.2001 may be referred to for details.
17. The goods
sent for jobwork abroad shall be returned to the unit for final
processing/manufacturing before export. The jobwork abroad shall be permitted
subject to execution of suitable bond and following the procedure for accountal
of goods sent including waste/rejects etc. as may be prescribed by the
Commissioner of Customs & Central Excise in this behalf. The goods shall be
allowed to be sent abroad only for specialized type of jobwork which are not
available in the country.
(vii) Debonding
of Capital Goods Imported under EOU/EPZ Scheme into EPCG Scheme.
18. The
notifications governing duty free import and procurement by EOU/EPZ/EHTP/STP
units provide that capital goods, material handling equipment, office equipment
& captive power plants imported/procured duty free under the said schemes
are allowed to be debonded in DTA on payment of Customs duty leviable on
depreciated value of such goods. Further, these goods may also be debonded under
the EPCG scheme on payment of duty of 10% ad valorem or at zero rate of duty.
19. Since 1st April 2000, for imports under EPCG scheme, a single duty regime i.e. 5% duty has been introduced and zero rate/10% duty regime has been done away with. In other words the supplies to EPCG License holders on debonding from April 2000 should be at 5% rate. The notifications relating to EOU/EPZ/EHTP/STP schemes including gem & jewellery sectors have been suitably amended to align them with the provision of the policy. Notification No. 56/2001-Cus, dated 18.5.2001 may be referred to for details.
(viii)
Clearance of Goods Manufactured by EOU/EPZ/EHTP/STP/SEZ Units against Advance
Release Order or Back to Back Inland Letter of Credit Issued against an Advance
Licence.
20. The EXIM
Policy provides that EOU/EPZ/EHTP/STP/SEZ units may supply goods against Advance
Release Order or Back to Back Inland Letter of Credit issued against Advance
Licence (except Advance Licence for intermediate supply) and Duty Free
Replenishment Certificate (DFRC). The notification No. 82/92-CE, dated 27.8.92,
provides for clearance of the goods against ARO or Back to Back Inland Letter of
Credit issued against Advance Licence by EOU/EPZ units without payment of
Central Excise duty. However, the notification provides that where the goods are
cleared against Advance Licence issued on or after 1.4.95, the exemption is
restricted to basic customs duty. Also in the notification, there is no
provision to clear goods against ARO or Back to Back Inland Letter of Credit
issued against DFRC. Further, there is no provision in the notification allowing
advance licence holder to procure goods from SEZ units.
21. The EXIM
Policy as revised upto 31.3.2000,
provides that import of inputs under Advance Licence including Advance Licence
including Advance Licence for deemed export are exempted from payment of basic
customs duty, surcharge, and additional customs duty [para 7.3]. Prior to
1-4-2000, imports of inputs under Advance Licence were exempted only from
payment of basic customs duty. Moreover, there was no DFRC scheme prior to
1-4-2000. Thus, the existing notification No. 82/92-CE is not aligned with the
revised provision of EXIM Policy, which has given rise to a dichotomy between
direct imports of inputs by Advance Licence holders vis-à-vis inputs sourced
from EOU/EPZ/EHTP/STP/SEZ against ARO and therefore, direct imports are being
effected even though supplies can be made by EOU/EPZ etc.
22. In view of
this, a notification (No. 28/2001-CE, dated 16-5-2001) has been issued in
supersession of notification No. 82/92-CE dated 27-8-1992 so as to allow
sourcing of goods from EOU/EPZ/EHTP/SEZ units against Advance Release Order and
Back to Back Inland Letter of Credit issued against Advance Licence (except
Advance Licence for intermediate supply) without payment of basic and additional
duty of customs. In case the goods are supplied against ARO and Back to Back
Inland Letter of Credit issued against DFRC, the duty equal to the additional
duty of customs leviable on like goods produced or manufactured outside India,
if imported into India would be leviable and exemption will be available only
from basic customs duty and special additional duty of customs.
(ix) DTA
Clearance to Bonded Warehouses set up under Paragraph 11.14 of the Policy or
under section 65 of the Customs Act,
23. As per paragraph 9-A. 8 (b) of the revised EXIM Policy, units in SEZ are allowed to clear goods manufactured by them including by-products and services to bonded warehouses set up under para 11.14 of the Policy and /or under section 65 of the Customs Act. As EXIM Policy allows SEZ units to make supplies to bonded warehouses set up under para 11.14 of the Policy and/or under section 65 of the Customs Act, 1962, notification Nos. 137/2000-Cus, & 52/2000-CE, both dated 19-10-2000, governing duty free import/procurement of goods by units in SEZ have been amended so as to align them with the Policy. It may be noted that such provisions already exist for clearances from EOU/EPZs without payment of duty.
(x)
Extension of benefit under notification No. 6/97-CE, dated 1-3-1997 to SEZ unit
manufacturing castor oil cake from fully indigenous castor oil seed on
indigenous plant & machinery.
24. Under the
SEZ scheme, the units are liable to pay excise duty equal in amount to aggregate
of customs duty leviable on like imported goods on their DTA sale. With effect
from 1-11-2000, four Export Processing Zones (EPZ) have been converted into
Special Economic Zones. Due to this sudden conversion from EPZ to SEZ, some
units producing Castor oil, working in the zone prior to 1-11-2000, have started
facing serious problem with regard to clearance of their by-product viz. Castor
Oil Cake in DTA. These goods are stated to be manufactured wholly from
indigenously procured Castor Oil Seeds using indigenous plant and machinery.
Prior to 1-11-2000, such units were eligible for clearance of Castor Oil Cake on
payment of Nil rate of duty under notification No. 6/97-CE, dated 1-3-97. Now,
suddenly due to conversion from EPZ to SEZ after 1-11-2000, the good viz. Castor
Oil Cake has become liable for payment of full rate of import duty. As major
part of this Castor Oil production is already in domestic area and they are not
suffering any excise duty on waste oil cake, the Castor Oil producing units
located in SEZs (erstwhile EPZs) have been seriously affected and are unable to
market waste oil cake being in disadvantageous position vis-a-viz EPZ units and
DTA units. Notification No. 6/97-CE, dated 1-3-1997 has been amended (vide
notification no. 29/2001-CE, dated 18-5-2001) so as to allow the benefit of this
notification to castor oil units in Special Economic Zone which were in
existence and functioning in Export Processing Zones before conversion of the
said Export Processing zones into Special Economic Zone with effect from
1-11-2000.
(xi) Duty on DTA
Clearance of Non-Excisable Goods;
25.
At present, the EOUs and units operating under EPZ/STP/EHTP Schemes are
allowed to sell finished products (including rejects, waste & scrap) in the
Domestic Tariff Area (DTA) on payment of applicable excise duty as per proviso
to section 3 of the Central Excise Act, 1944. However, the same
is applicable if the goods being cleared into DTA are
excisable goods. Under the present dispensation, the notifications
providing duty free import of goods under the above said
Schemes stipulate that where the finished products (including rejects,
wastes & scrap) sought to be cleared in DTA are not excisable, such products
are allowed to be cleared on payment of customs duty on the inputs used for the
purpose of production, manufacture, processing or packing such products in an
amount equal to the customs duty leviable on such products as if imported as
such.
26. It has been
brought to notice of the Board that in some Commissionerates, the floriculture
units under the EOU Scheme are being asked to pay duty equivalent to the customs
duty leviable on finished goods as if imported as such, for clearance of cut
flowers, which is not an excisable commodity. It has also been stated that the
DTA units are not required to pay any
duty for sale of cut flowers, as the same are not excisable. This is stated to
have placed the floriculture units in EOUs at a serious disadvantageous position
vis-à-vis DTA units.
27.
The matter has been examined. In the central excise notifications
governing duty free procurement by EOUs and units under EPZ/STP/ETHP Schemes,
there is a provision to recover duty on the inputs & consumables procured
duty free under exemption notification, which have gone into production of
non-excisable goods cleared into DTA. In the notifications governing duty free
import by EOUs and the EPZ/STP/EHTP units, the anomaly, however, exists in as
much as the notifications talk about payment of customs duty on the inputs used
in the manufacture of articles in an amount equal to the Customs duty leviable
on such articles as if imported as such. In order to remove this anomaly, all
the notifications governing duty free import of goods by STP/EHTP/EPZ units and
EOUs including those in Aquaculture and Agriculture sector have been amended so
as to bring the provisions of these notifications in harmony with the provisions
of corresponding Central Excise notifications. Notification No. 56/2001-Cus,
dated 18.5.2001 may be seen for details.
(xii)
Destruction of Flower/Floriculture Products Without Payment of Duty
28. A number of
requests has been received from the Trade for allowing destruction of flowers
and floriculture products without payment of duty as, in the notifications
governing duty free import/procurement by agriculture units in EOU there is no
enabling provision for destruction of finished products like flowers and
vegetables, which are grown/processed in the EOU, without payment of duty.
29. Flowers,
Vegetables and agricultural products have a short shelf life and are prone to
malformation, injury, damage, infection etc. These products cannot be preserved
for a longer period. There are circumstances (especially in case of floriculture
units) when the units do not find the goods exportable/marketable for various
reasons such as malformation, injury, damage, infection by pest and diseases
etc. and the units have to resort to forced destruction of flowers, vegetables
etc. But in absence of any enabling provision, such units cannot destroy the
same without payment of duty. In notification No. 53/97-Cus, dt. 3.6.97,
governing duty free import of goods by EOU, there is a provision for destruction
of rejects, waste, scrap without payment of duty.
30. Considering
the genuine problem of the EOUs in agriculture sector and keeping in mind the
perishable nature of goods these units produce, there is a case for allowing
agriculture units in EOUs also to destroy rejects & waste (finished
goods) without payment of duty. Accordingly, the notifications Nos. 126/94-Cus
dt. 3.6.94 and 136/94-CE, dt.10.11.94, governing duty free import/procurement by
agricultural EOU have been amended suitably to provide for destruction of
rejects and waste without payment of duty.
31. It has been brought to the notice of the Board that sometimes exporters even after depositing the goods in the warehouse of the airlines at the International Airports, fail to export the goods in time owing to various reasons such as delay in flights, cancellation of flights etc. beyond the control of exporters. In such circumstances, the agricultural products such as flowers etc. having a short shell life tends to degenerate very fast & thus the exporters do not find the consignment fit for export and are forced to withdraw. However, the exporters do not find it cost effective to take the consignment back to the unit for destruction/DTA sale, as the case may be.
32. In
order to help remove the difficulties of exporters, it has been decided to allow
DTA sale of such flowers and floricultural products on payment of applicable
duty, provided the unit is entitled to such DTA sale. The unit shall bring
permission from the Development Commissioner for such DTA sale and clear the
goods on payment of duty assessed by Assistant Commissioner/Deputy Commissioner
in charge of export cargo against
the documents as used for DTA sale by EOU/EPZ in the manner as if the goods
cleared from the unit itself.
33. Wide
publicity may be given to the above changes by issue of a Public Notice in this
regard.
34.
Difficulties, if any, faced in implementation of the above changes, may be
brought to the notice of the Board at an early date.
Sd/-
|
|
(C.P.
Goyal) |
|
Sr.
Technical Officer (FTT) |